Maybank IB Research sees better 4Q for Gamuda


  • Analyst Reports
  • Thursday, 25 Jun 2020

KUALA LUMPUR: Maybank Investment Bank Research expects the fourth quarter ending July 31,2020 for infrastructure-property company Gamuda Bhd to be better as work pace at its projects has picked up after the government allowed construction activities to resume from May 4.

The research house said on Thursday that while the Klang Valley MRT2 was now at 70-75% of its optimum/pre-movement control order (MCO) level; its work pace was however expected to peak at only 90%-95% of its pre-MCO level under the new social distancing normal.

“Traffic has also returned to its urban toll roads; volume now is down just 10% from its pre-MCO level. However, we do not expect traffic volume to be back to its pre-MCO level anytime soon as working-from-home is becoming prevalent, and schools have yet to fully resume; these will cap the recovery in road users, ” it said.

It issued the report after Gamuda announced its third quarter results ended April 30.

Hit by the MCO, Gamuda posted a 3QFY20 net profit of just RM40mil (-77% YoY/QoQ), bringing 9MFY20 to MYR389m (-25% YoY), meeting only 59%/63% of Maybank Research/consensus FY estimates.

“This is its weakest quarter in over a decade (since 4QFY09). 4QFY20 should be better, but activities should still be below their optimum/pre-MCO levels. We cut earnings forecasts and D/G the stock to Hold due to a reduced upside to our new RM3.80 RNAV-TP (-30sen) and in lack of a near-term re-rating catalyst, ” it said.

Gamuda’s 3QFY20 reflected half a quarter of almost no construction activities (with the exception of KVMRT2 underground works) and property progress billings, and one month of 80-90% traffic fall at toll roads, due to the MCO.

Group revenue halved YoY/QoQ while net profit fell 77% YoY/QoQ, as it continued to incur fixed overheads and new sum-of-parts compliant costs.

Coupled with a uncertain business prospect, no interim dividend was declared; FY20 DPS will be just 6sen (FY19: 12sen).

“We cut FY20/21/22E earnings by 26%/6%/1%. Supporting mid-term earnings is its sizeable outstanding construction orderbook of RM7.5bil and unbilled property sales of RM3bil.

"Near-term re-rating catalysts are however lacking. While Gamuda is a beneficiary of major infra project roll-outs due to its strong track records, we believe the government’s near-term focus will be on the smaller project roll-outs which have a shorter lead-time; thus, their multiplier impact is more immediate, ” Maybank Research said.

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